Expectations from Union Budget 2012
A Vellayan, Chairman – Murugappa Group


The Budget is an opportunity for the Finance Minister to put the country
back on the growth track. Some areas where he can make bold moves
which will benefit the GDP growth are as follows:
  • Reforms and spends in infrastructure and Government spends, which will benefit the economy on the whole, and also have a trickle-down effect on all other sectors

  • The Goods and Service Tax (GST), which can be an enabler to reduce costs being cascaded to every stage

  • Increased credit cost is a hindrance for growth. We would like to see measures to increase liquidity, specifically on Repo rate, CRR etc

  • On the currency side, rupee has been depreciating steeply, largely due to the high trade deficit on a monthly basis. The main users of foreign exchange are

    • Defence

    • Oil imports

    • Fertiliser raw materials

    • Gold

    • FII outflows

    Among the above five, sizeable foreign exchange can be saved by strictly enforcing the offset obligations in defence procurement. Secondly, we can also save valuable foreign exchange by restricting indiscriminate import of gold.

  • On the fertiliser side, there are already positive moves to reduce subsidy substantially in the coming year. In order to further reduce fertiliser subsidy, the Government should consider increasing urea prices substantially. This would also bring back balanced user of fertilisers.

  • In the current environment, increase in excise duties will not be appropriate as the manufacturing industry is already impacted by increased input costs from raw material and power.

  • A comprehensive decontrol policy for the sugar industry, removing the levy quota and exempting Service Tax in agricultural services would be helpful. A tax incentive or holiday could be considered for ethanol and power coming out of cogeneration.

  • The Service Tax, VAT and other indirect taxation provisions for the Construction sector needs a complete overhaul across all States. There should be uniformity in taxes and the procedures made much simple.


Important Message